******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In re Applications of ) ) San Luis Obispo Broadcasting Limited Partnership ) File Nos. BR-900731A7 ) BRH-900731ZH For Renewal of Licenses for ) Stations KKCB(AM)/KSLY-FM ) San Luis Obispo, California ) MEMORANDUM OPINION AND ORDER Adopted: December 9, 1997 Released: January 13, 1998 By the Commission: I. INTRODUCTION 1. The Commission has before it for consideration: (i) its Memorandum Opinion and Order and Forfeiture Order in San Luis Obispo Limited Partnership, 11 FCC Rcd 9616 (1996) ("Forfeiture Order"); and (ii) a petition for reconsideration of that decision filed by San Luis Obispo Broadcasting Limited Partnership ("licensee"). For the reasons that follow, we deny the licensee's petition for reconsideration. II. BACKGROUND/PLEADINGS 2. In the Forfeiture Order, we reduced the forfeiture amount assessed in the Memorandum Opinion and Order and Notice of Apparent Liability in San Luis Obispo Limited Partnership, 9 FCC Rcd 894 (1994) ("SLO"). In SLO, we found that the licensee of Stations KKCB(AM)/KSLY-FM had apparently violated our Equal Employment Opportunity ("EEO) Rule, 47 C.F.R.  73.2080, during the license term ending December 1, 1990. We therefore renewed the licenses for KKCB(AM)/KSLY-FM for a short-term, imposed reporting conditions, and issued a Notice of Apparent Liability ("NAL") for a $25,000 forfeiture, relying upon the guidelines set forth in Standards for Assessing Forfeitures for Violations of EEO Rules, 9 FCC Rcd 929 (1994) ("EEO Policy Statement"). In the Forfeiture Order, we noted that the EEO Policy Statement had been vacated, and we therefore recalculated the forfeiture amount by relying on case precedent, which was the basis for determining the amount of forfeitures prior to the EEO Policy Statement. We determined that a forfeiture in the amount of $12,000 was appropriate because the EEO record of the licensee was comparable to that of the licensee of Station KGWN-TV, Cheyenne, Wyoming. In Stauffer Communications, Inc., 10 FCC Rcd 5060 (1995) ("Stauffer"), we found that KGWN-TV's EEO record warranted a forfeiture of $12,000. 3. In the Forfeiture Order, we also denied the licensee's request that the forfeiture be rescinded or reduced below $12,000 due to its poor financial condition because the information submitted by the licensee in support of its financial hardship claim -- its tax returns for 1990, 1991, and 1992 -- was out of date and inadequate. First, we found that the tax returns for 1990-1992 involve financial information for a period of time more than one year prior to the licensee's response to the NAL, even though the licensee was advised in the attachment to the NAL that any statement concerning inability to pay "should contain no data older than one year from the date of your response." Moreover, we determined that even if the material had been current, the tax returns do not reflect profit and loss information which demonstrates actual financial condition. Second, we concluded that the sale of KSLY- FM in 1994, at what the licensee claims was a substantial loss, did not establish that the licensee is unable to pay a $12,000 forfeiture. Beyond its claim that a loss was incurred, the licensee presented no accompanying data to demonstrate current cash flows and other indicia of actual financial condition. Thus, there was no basis for determining the licensee's ability to pay. Finally, we found that the licensee failed to show that any other factors warranted reduction or rescission of the forfeiture. 4. In its petition for reconsideration of the Forfeiture Order, the licensee argues first that its EEO record is "far superior" to that of Station KGWN-TV, with which it was compared in the Forfeiture Order. In support of this argument, the licensee states that KGWN-TV attracted only two minority applicants for 26 positions overall and only one minority applicant for 20 upper-level positions and hired only one minority for a lower-level position (3.8% of all hires). By contrast, the licensee says, KKCB(AM)/KSLY-FM hired minorities for 13 of 72 positions overall (18.1% of all such hires) and for nine of 61 upper-level positions (14.8% of all such hires). Moreover, the licensee argues that KGWN-TV acknowledged that it had difficulty attracting an adequate number of minority candidates, warranting a special effort to identify and contact minority recruitment sources. The licensee contends that with its hiring record, it is obvious that its recruitment activities were at least "adequate," and the licensee submits that they were far better than that "by any reasonable measure." 5. The licensee next argues that if its only "failure" under the EEO policies was that it did not maintain detailed recruitment records, "it is manifestly unfair to impose on the licensee standards of forfeiture developed after -- and in many cases well after -- the last date by which the licensee was able to correct its actions." According to the licensee, in decisions announced by the Commission during 1990, at the time that the licensee realized and then corrected its failure to maintain detailed recruiting records, the Commission was imposing less onerous sanctions and remedies for similar failings. The licensee asserts that it is particularly unfair to calculate its fine by comparison to the actions of KGWN- TV because KGWN-TV's failings occurred during the period from 1990 to 1993, after the licensee here had filed its renewal applications and effected its curative action. The licensee further asserts that if it were able to introduce its corrective recordkeeping practices for 1990 to 1993 -- the period which was at issue in Stauffer -- there would be no basis for a fine at all. 6. In addition, the licensee argues that we apparently disregarded its contention that its past record of overall compliance with the Commission's rules and policies warrants a reduction in the forfeiture. In this regard, the licensee complains that there is no substantive discussion in the Forfeiture Order of the effect of its previous "spotless" record of compliance on the amount of the forfeiture imposed. 7. The licensee also disputes our conclusion in the Forfeiture Order that the financial information which it submitted in support of its financial hardship claim was out of date and inadequate. The licensee states that its 1990-1992 tax returns were the most detailed and current information available when it filed the petition for reconsideration of SLO in March 1994. Further, the licensee contends that these tax returns do contain all of the financial information necessary to establish its "actual" financial condition and the losses realized during this period. Nevertheless, the licensee submits a copy of its tax return for calendar year 1993, which it claims was previously unavailable. Additionally, the licensee argues that the loss it incurred on the sale of KSLY-FM, standing alone, documents the type of adverse financial circumstances warranting a reduction in a forfeiture. 8. By letter dated April 9, 1997, Commission staff informed the licensee that its 1993 tax return was out of date, and therefore was inadequate to support its financial hardship claim. Letter to Guy P. Hackman (April 9, 1997). The staff noted that while this information may have been current when the licensee filed its initial response to the NAL, it does not reflect the licensee's present ability to pay the forfeiture. The staff accordingly requested that the licensee submit financial statements for a one-year period, no earlier than the year ending December 31, 1996. 9. In response to the staff letter, the licensee has submitted a copy of its tax return and a financial statement for the year ending December 31, 1996. In addition, it has furnished a sworn declaration from its principal partner, Guy P. Hackman. This declaration states that when the licensee acquired KKCB(AM)/KSLY-FM in 1986, it delivered to the former owner a promissory note for a portion of the purchase price; that the licensee has consistently suffered operating losses; that when KSLY-FM was sold in 1994, the proceeds of the sale were not retained by the licensee, but rather were paid to the former owner with respect to debt then in default under the promissory note; and that after the sale of KSLY-FM, the licensee still owed a substantial sum in principal and accrued interest under the promissory note, none of which was assumed by the buyer of the FM station. Thus, the licensee argues that the circumstances here are substantially identical to that in Pinnacle Communications, Inc., 11 FCC Rcd 15496 (1996) ("Pinnacle"), where the Commission rescinded a $31,250 forfeiture assessed against the licensee of KTMS/KTHY-FM, Santa Barbara, California, due to its financial condition. III. DIS CUSSION 10. We reject the licensee's argument that its EEO record is "far superior" to that of the licensee in Stauffer. As noted in the Forfeiture Order, KKCB(AM)/KSLY-FM and KGWN-TV had comparable percentages of minorities in their respective labor forces. Moreover, the licensees of these stations both lacked specific information about applicants, interviewees, and recruitment contacts, information which is essential for licensees to self-assess the effectiveness of their recruitment efforts. Although KGWN-TV was a larger station, KKCB(AM)/KSLY-FM had more than twice as many vacancies (72 as compared to 26) and was unable to verify recruitment for nearly twice as many vacancies (20 as compared to 11). Because KKCB(AM)/KSLY-FM had more than twice as many vacancies, the licensee of these stations had more opportunities to review and assess its EEO program and to correct any deficiencies. All matters considered, the records of the two stations are comparable. Further, we cannot accept the licensee's contention that its hiring record for minorities compels a conclusion that its recruitment efforts were at least adequate. Hiring or employing minorities within certain numerical parameters does not automatically insulate licensees from scrutiny. Rather, our focus is on the licensee's efforts, particularly its recruitment efforts and its efforts to self-assess the results of its EEO program. See, e.g., Amendment of Part 73 of the Commission's Rules Concerning Equal Employment Opportunities in the Broadcast Radio and Television Services, 2 FCC Rcd 3967, 3974 (1987); Carolina Christian Broadcasting, Inc., 3 FCC Rcd 1907, 1910 (1988); Historic Hudson Valley Radio, Inc., 11 FCC Rcd 7391, 7394 (1996). See also D.W.S., Inc., 7 FCC Rcd 7170, 7172 n.8 (1992) (meeting or exceeding the processing guidelines is not a "safe harbor"). Indeed, the Commission acknowledged the licensee's efforts to attract, interview and employ qualified minorities and women in SLO, but the record also reveals numerous deficiencies in the areas of recruitment, recordkeeping and self-assessment. 11. Further, we find no merit in the licensee's second argument -- that if its only "failure" was that it did not maintain detailed recruitment records, it is unfair to impose on the licensee standards of forfeiture developed after it was able to correct its actions. Initially, we note that the burden was on the licensee to demonstrate what recruitment efforts it had made and its attempts to self-assess those efforts. The licensee was unable to verify that it recruited for 20 (27.8%) of 72 vacancies. In addition, the licensee's submissions showed that it recruited using only general recruitment sources for the remaining 52 vacancies and that minorities were in only 13 (18.1%) of 72 applicant and interview pools. We could not conclude based on this data, nor could the licensee, that its recruitment and self-assessment efforts were adequate. Thus, the licensee's arguments notwithstanding, the record does not manifest evidence of recruitment for every vacancy and ongoing meaningful self-assessment as required by our EEO Rule. Under these circumstances, it is clear that the licensee's recruitment and self-assessment were not in accordance with our EEO Rule. 12. Additionally, we disagree with the licensee's assertion that we imposed on it standards of forfeiture developed after its license term expired. The 1990 cases cited by the licensee related to stations whose licenses expired prior to the adoption of the 1989 amendment to our forfeiture authority. By contrast, the licenses for KKCB(AM)/KSLY-FM and KGWN-TV expired after Congress amended our forfeiture authority in 1989 to permit substantially higher forfeitures. Since the same forfeiture authority was applicable to both KKCB(AM)/KSLY-FM and KGWN-TV, it is irrelevant that the violations of KGWN-TV occurred later. In both instances, EEO efforts during the current license term were evaluated. In that regard, consideration of the alleged post-term improvements in the licensee's EEO recordkeeping was not appropriate because violations during the license term warranted sanctions. See Rust Communications Group, Inc., 73 FCC 2d 39, 53 (1979); Walker County Communications, Inc., 11 FCC Rcd 17506, 17510 (1996). 13. We also reject the licensee's argument that its prior record of compliance with the Commission's Rules was not taken into account in setting the forfeiture. While the Forfeiture Order did not expressly reference the licensee's past record, as noted in the Forfeiture Order, the relevant statutory factors set forth in Section 503(b)(2)(D) of the Communications Act, including the nature, circumstances, extent and gravity of the violations, and the licensee's record of compliance with our rules, were considered in setting the forfeiture amount. Reduction of the forfeiture based on the licensee's past record was not warranted here in view of the serious nature of the violations -- specifically, that the licensee could not verify minority and female recruitment for 20 (27.8%) of 72 vacancies, kept no records of the composition of its applicant pools, and could show that it attracted minorities to only 13 (18.1%) of 72 applicant pools. 14. Finally, after reviewing the financial documents submitted by the licensee, we deny the licensee's request that we reduce or rescind the forfeiture due to its financial condition. We recognize that the licensee has incurred significant losses since its establishment in 1986. Nevertheless, we note that the licensee showed a net profit for the twelve months ending December 31, 1996, and that the licensee's partners received sizable guaranteed cash payments and property distributions in 1996. Furthermore, we believe that Pinnacle is distinguishable from the instant case. In Pinnacle, we found that the Transfer and Assignment Agreement ("Agreement") submitted with the applications to assign the licenses for KTMS/KTHY-FM showed that the licensee was in default on a $4,000,000 loan obligation which was personally guaranteed by the licensee's principal; that the Agreement was entered into in order to avoid foreclosure; that the consideration to be received by the licensee consisted entirely of a partial assumption of its outstanding liabilities by the buyer; that the Agreement provided for no cash payments to either the licensee or its principal; and that the Agreement excluded from assumed liabilities any debt owed by the licensee to its principal. 11 FCC Rcd at 15498. The licensee in the instant case states that its circumstances are substantially identical to that in Pinnacle because: it was in default on a promissory note executed in connection with the acquisition of KKCB(AM)/KSLY-FM when it sold KSLY-FM; it did not retain any of the proceeds from the sale of KSLY-FM; and the buyer of KSLY-FM did not assume past due obligations owed by the licensee. However, unlike the licensee in Pinnacle, the licensee here retained one of its stations, KKCB(AM), and, as noted above, this station showed a net profit for 1996. Moreover, in 1996, the licensee's partners received guaranteed cash payments and property distributions. In view of all of the foregoing circumstances, we do not believe that any reduction in the forfeiture amount is warranted. IV. ORDERING CLAUSES 15. Accordingly, IT IS ORDERED that the Petition for Reconsideration filed September 16, 1996, by San Luis Obispo Broadcasting Limited Partnership IS DENIED. 16. IT IS FURTHER ORDERED that San Luis Obispo Broadcasting Limited Partnership's request for confidentiality IS GRANTED, and that the financial documents submitted with its petition for reconsideration SHALL BE KEPT CONFIDENTIAL pursuant to Sections 0.457 and 0.459 of the Commission's Rules, 47 C.F.R.  0.457 and 0.459. 17. IT IS FURTHER ORDERED that the Mass Media Bureau send by Certified Mail -- Return Receipt Requested -- a copy of this Memorandum Opinion and Order to San Luis Obispo Broadcasting Limited Partnership. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary